The (early) Lunch Wrap | FT Alphaville

The (early) Lunch Wrap

Good morning New York,

FT ALPHAVILLE

Sorry, commodities are a poor diversification tool: An interesting paper has just landed on the BIS working paper site, in which the myth that commodities provide a solid diversification tool for investment portfolios has been beautifully debunked. The grounds for this are mostly due to too much correlation, and volatility. Plenty more from Izzy here.

Flash PMIs, another China data disappointment: Shocking. The China flash manufacturing PMI for July is 47.7, the lowest number in 11 months and a decent step down from June’s final figure of 48.2. It also was well short of consensus expectations that July would maintain the 48.2 level. The employment sub-index was fell to 47.3 from 47.6 in June, its lowest since March 2009, and there’s very little to be upbeat about the breakdown — apart from diminishing inventories.

The IMF won’t be Argentina’s pari passu frenemy. Why? Joseph wonders if you’ve hear the one about the IMF sending an amicus curiae brief to the highest court in the United States in favour of taking up the pari passu case of its infamous lost cause, Argentina? Well here’s the punchline: US opposition has abruptly killed the plan.

NEWS

US plans criminal charges against SAC Capital: US prosecutors are preparing criminal charges against SAC Capital, the $15bn hedge fund run by Steve Cohen that is the subject of an insider trading investigation, according to a person familiar with the matter. The criminal charges, which could be announced in the next several days, would be the most significant action against SAC since prosecutors and agents with the Federal Bureau of Investigation and the Securities and Exchange Commission began looking at the firm nearly a decade ago. A number of individuals may also face criminal charges, but not Mr Cohen himself, the person said. (Financial Times)

China bans construction of government buildings for five years: China has banned the construction of government offices for the next five years, ratcheting up an austerity campaign that has already taken a toll on the economy. The State Council, China’s cabinet, and the Communist party late on Tuesday said the ban, which takes immediate effect, would also apply to the expansion of existing buildings. (Financial Times)

“A showdown over the biggest municipal bankruptcy filing in U.S. history begins in a federal court on Wednesday morning as creditors challenge its legality. Attorneys for Kevyn Orr, a corporate bankruptcy lawyer tapped by Michigan officials in March as Detroit’s emergency manager, want U.S. Bankruptcy Judge Steven Rhodes to put on hold a flurry of lawsuits claiming the Chapter 9 bankruptcy filing violates the state constitution.” (Reuters)

iPhone sales boost Apple shares: “Sales of 31.2m iPhones in the quarter ended in June, up 20 per cent over the previous year, comfortably outstripped analysts’ consensus of around 27m units. “I don’t subscribe to the common view that the higher-end smartphone market has hit its peak,” Tim Cook, Apple’s chief executive, said, citing distribution improvements that helped increase iPhone volumes in India, Turkey and the Philippines. “We saw very strong sales in many of the emerging markets.” Bar China where sales fell 14 per cent overall.. (Financial Times)

The UK’s Vince Cable has criticised the Bank of England’s “capital Taliban” for holding back a recovery: Cable told the FT he believes the BoE has held back small business lending by demanding banks hold onerous levels of capital. (Financial Times)

Japan’s exports rose for a fourth straight month in June due to a weak yen and shipments to the EU climbing 8.6% from a year earlier, the first gain in 21 months. Shipments to the US rose 14.6%. The trade deficit was Y180.8bn ($1.8bn); bigger than the expected Y160.6bn but much lower than May’s Y996.4bn. (Bloomberg)

A former HSBC banker has emerged as the leading external candidate for RBS chief executive, according to three people close to the process. Mark McCombe is vying with at least four other candidates to replace Stephen Hester. David Roberts, a former Barclays executive who now sits on the Lloyds board, is seen as a second credible external candidate. The three top internal candidates are Ross McEwan, Bruce van Saun, and Chris Sullivan. (Financial Times)

GlaxoSmithKline is considering cutting prescription-linked commissions paid to its sales staff and reducing drug prices in China amid the fall-out from a growing corruption probe. (Financial Times)

Huawei Technologies sales rose 11% in the first half, as a push into mobile devices helped expand its lead over Ericsson. (Bloomberg)

Big US banks are warning that new funding rules risk damaging the $7tn repo market, where financial institutions borrow against government bonds, potentially destabilising one of the most important financial markets in the world. (Financial Times)

“Ford Motor is to develop its hybrid drive technology for light trucks independently of Japan’s Toyota after the pair broke off co-operation in the field amid robust statements from Ford about its strong future in the technology.” (Financial Times)

Markets: Better news on the European economy is outweighing disappointing data out of China, reviving bullish momentum for equities, copper and the euro. The market mood is also getting a lift from well-received earnings figures from Apple, which are adding to optimism over the health of corporate America as investors continue to exhibit acceptance that Federal Reserve support may wane in coming months. The FTSE All-World stock index is up 0.1 per cent at 247.9, just 2 points or so shy of a fresh 5-year high, after the Asia-Pacific region dipped marginally and as the FTSE Eurofirst 300 advances 0.4 per cent. US index futures portray the S&P 500 gaining 4 points to 1,696, a move that would leave Wall Street’s premier barometer challenging Monday’s record close writes the FT’s Global Markets sommelier Jamie Chisholm.